In college, I shaved my head into a raging spiked mohawk.
Later, I bought a house to “flip” and spent two years remodeling it, only to break even. (Here’s that tragic story!)
Then there’s the time that I tried to eat a two-pound block of sharp cheddar cheese to win $20.
We all do stupid things. It’s part of what makes us human. However, some of those blunders can cause a lot more long-term consequences than others.
Especially financial blunders.
Related: How to Figure Out Your Margins
And since I’m just as guilty of making these mistakes as the next entrepreneur, I’ve decided to reach out to some of the web’s brightest personal finance bloggers to chime in on the topic. The following six financial blunders have been provided by financial writers I’ve come to read and respect through FinCon (the annual Financial Bloggers Conference).
Take a look at the following list and ask yourself, “Am I making any of these financial blunders?”
1. Empty bank accounts
“As entrepreneurs, we tend to be really bad at hanging onto cash. As soon as there is some money in the bank, we are constantly reinvesting in our companies. While this has great ROI potential, it leaves us vulnerable to shifts in the marketplace. Keeping cash is like having insurance against life … you just don’t know what’s going to happen in your business or personal life that may require you to have cash on hand, but you will be very thankful you had it when that time comes.”
– Alan Moore, XYPlanningNetwork.com
2. Spending without an ROI in mind
“Every dollar you spend as a company has to have a potentially positive ROI. Don’t chase after vanity or ‘branding,’ unless you can quantify it somehow. It doesn’t have to always have a positive ROI, that’s why you test, but it has to have the potential.”
– Jim Wang, KasaiMedia.com
3. Being too frugal
“Don’t skimp on costs necessary to grow your business, even if you’re not making a lot of money yet. The same frugality you apply to your personal life doesn’t apply in business. Spend money on products and services that simplify your business life, make you more efficient or grow your ultimate bottom line. Think long term and guard yourself against unnecessary burnout due to doing too much yourself.”
– Lena Presley Gott, WhatMommyDoes.com
4. Disorganization that leads to extra expenses
“Disorganization is toxic. Missed deadlines, out-of-control expenses and the constant 'where-did-I-put-that’ scrambling all act as friction on your forward momentum and growth. Put into practice a system of organization that enables you to keep the nuts and bolts in place, so you can work your high-value magic efficiently.”
– John Wedding, MightyBargainHunter.com
5. Expensing everything at tax time
“Thinking it’s OK to expense everything because it’s a tax write-off, especially if it’s not essential to your company.”
– Glen Craig, FreeFromBroke.com
6. Not knowing when to pivot (or quit)
“I see this one a lot: pouring money into your business when you should be pivoting or shutting down. You should have traction (paying customers) within a few months after starting the business. If you’re using another definition of 'traction’ then you’re just fooling yourself, wasting your time, and delaying the inevitable.”
– Doug Nordman, The-Military-Guide.com
While you are busy working in your business, trying to create the next big thing, don’t forget to work on your business as well and keep an eye on the financial shape of your company.
Eating a two-pound block of cheese will mess you up for a couple days. Sporting a mohawk will mess you up for a couple weeks. But making one of the above financial blunders? That could mess you up for life.